2014 Preliminary Results John Hutson – CEO Kirk Davis – FD The Port Jackson, Bishop’s Stortford
Kirk Davis FD 12 September 2014 The Admiral Collingwood, Ilfracombe
Financial Summary 52 weeks to 27/07 2014 2013 Revenue £1,409.3m £1,280.9m +10.0% Like-for-like sales +5.5% +5.8% Operating profit £115.6m £111.3m +3.8% Profit before tax £79.4m £76.9m +3.1% Earnings per share (including shares held in trust) 47.0p 44.8p +4.9% Free cash flow £92.9m £65.3m +42.1% Free cash flow per share 74.1p 51.8p +43.1% Dividend 12.0p 12.0p maintained After Exceptional Items: Operating profit £115.6m £91.5m +26.3% Profit before tax £78.4m £57.1m +37.1% Earnings per share (including shares held in trust) 32.8p 36.6p -10.4% 3
Average Sales Per Pub Week (including VAT) £000 36.0 36 34.0 34 32.3 31.1 32 30.3 30.1 30.1 29.9 29.0 30 28.2 28 26 24 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Record Average Sales Per Pub Week 4
Profit before Tax & Exceptional Items £m 79.4 76.9 80.0 72.4 75.0 71.0 70.0 66.2 66.8 65.0 62.0 58.4 58.2 60.0 55.0 47.2 50.0 45.0 40.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Record PBT (pre-exceptional) performance 5
Earnings Per Share before exceptional items (pence)* pence 47.0 50.0 44.8 45.0 39.8 40.0 36.0 34.1 32.6 35.0 28.1 27.6 30.0 24.1 25.0 16.9 20.0 15.0 10.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Record EPS (pre-exceptional) performance *Including shares held in trust 6
Like-for-like Performance % 2014 2013 2012 2011 2010 2009 2008 2007 Bar +2.7 +3.8 +2.8 +1.7 -0.8 +2.5 -4.3 +3.3 Food +12.0 +10.9 +4.8 +4.2 +0.1 -0.4 +7.9 +12.6 Machines -3.1 +0.4 -2.8 -3.9 +12.1 -7.5 -5.8 +2.7 LFL sales +5.5 +5.8 +3.2 +2.1 +0.1 +1.2 -1.1 +5.6 LFL Pub Profit* +2.0 +4.4 -2.2 -1.2 -2.0 -1.7 -6.6 +7.0 Improved LFL sales and pub profit performance *Excludes head office, depreciation, share incentive plan and interest costs 7
Operating Margin - Summary 2014 2014 2013 2013 £m % of £m % of Sales Sales Turnover 1,409.3 - 1,280.9 - Pub profit (pre repairs) 283.4 20.1 260.2 20.3 Repairs (56.6) (4.0) (48.0) (3.7) Head office costs (45.0) (3.2) (41.7) (3.3) Share Incentive Plan (7.1) (0.5) (6.1) (0.5) Depreciation & impairment (59.1) (4.2) (53.1) (4.1) Operating profit (before exceptionals) 115.6 8.2 111.3 8.7 Exceptional items - - (19.8) (1.6) Operating profit 115.6 8.2 91.5 7.1 8
Cost Increases • Tax increases: machine duty and carbon tax • Bar and food supplies around 3% • Utility costs: +5% (price up 3% and consumption up 2% including new pubs) • We have also increased our investment in staff costs and repairs expenditure 9
Exceptional Items - Summary 2014 2013 Operating exceptional items £000 £000 - Property impairment 15,551 Onerous lease provision - 3,278 - Loss on disposal of P, P&E 971 - Total operating exceptional items 19,800 Other exceptional items Interest on HMRC repayment 997 - Current income tax (4,375) (776) Deferred tax 21,119 - Total exceptional items 17,741 19,024 £997k cash charge in the year 10
Allocation of Resources £90m £123m £161m £90m £59m £108m £164m £159m £117m £218m £15m £24m Dividend £25m £5m £5m £15m £10m FH reversions & £8m £33m investment £23m properties £7m £76m £15m Buybacks £8m £26m £8m £17m £78m £154m £12m £121m £43m £10m Capex £113m £94m £82m £75m £61m £49m £39m £38m 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Increase in capital expenditure due to new openings, reinvestment and freehold reversions 11
Capital Expenditure 2014 2013 £m £m New Openings: Acquisition and development costs Current year 64.5 48.1 Future year 33.2 5.1 Property investment 23.6 7.7 121.3 60.9 Reinvestment in existing pubs: Kitchen and bar equipment / furniture etc. 22.6 16.7 Refurbishments 22.0 12.8 Business and IT projects 11.6 11.4 56.2 40.9 Total 177.5 101.8 12
Movement in Net Debt inc. Finance leases £m • FY13 Net debt 474.2 Free cash flow increased to £92.9m (2013: £65.3m) due to a working Free cash flow (92.9) capital inflow of £29.9 m in the year Disposal of fixed assets (0.5) compared to an outflow of £6.0m in the previous year New pubs 97.7 • Total net debt (including finance Freehold reversions and investment 23.6 leases) of £556.6m, an increase of properties £82.4m in the last 12 months (July Share buy-backs 24.6 2013: £474.2m) Dividends 14.9 HMRC - Rank Claim repayment 16.7 Other (1.7) FY14 Net debt 556.6 13
Debt Position 2014 2013 Net debt/EBITDA 3.21 2.88 Interest cover (times) 3.11 2.66 Interest cover pre exceptional (times) 3.19 3.24 Fixed charge cover (times) statutory 1.75 1.56 excluding depreciation 2.31 2.08 excluding depreciation and exceptionals 2.33 2.27 Average interest rate 6.63% 6.83% 14
Dividends • 12p total dividend (2013: 12p) – 8p full year proposed – 4p interim dividend paid – Dividend cover is 2.8 times (2013: 3.2 times) • Dividend maintained The Black Boy, Newtown, Wales 15
Financial Summary • Strong sales and robust financial performance • Slight operating margin decline: increased LFL pub profits • Continued strong cash generation • Opportunities to continue investment in core estate and new openings The Bath Arms, Warminster 16
John Hutson CEO Philly cheese steak sandwich Peri-peri roast chicken
Business Update The Man in the Moon, Newport, IOW • Property • People • Changing Sales Mix • Peach Brandtrack • Continued improvement • Cost outlook • Taxation • Current trading and outlook 18
Property Update • Average cost of development £1.64m, compared to £1.55m last year due to increased investment in beer gardens, hotel 2014 2013 rooms and kitchen equipment Trading pubs at start of FY 886 860 • In the current financial year, as at 12 Freehold pubs opened 31 14 September 2014 we have opened 1 pub and have 11 pubs on site Leasehold pubs opened 15 15 Closures/disposals -5 -3 • As previously mentioned we anticipate opening approximately 30-40 pubs this Total trading pubs 927 886 financial year Jolly’s Hotel, Broughty Ferry Freehold, Leasehold, 432 495 (47%) (53%) 19
“It’s a People Thing” • 145 employees have graduated from the catering academy this year, with over 800 employees currently going through the programme • Staff retention at its highest ever level. Average length of service of pub managers now 10 years and 1 month and 6 years and 6 months for kitchen managers • We have been recognised as one of the ‘Top Employers UK 2014’ in a Guardian publication for 11 consecutive years • Bonus – £29.2m paid in the year (2013: £28.1m), 82% of bonus awards made to employees in the pubs • Over 10,000 employees are shareholders in the Company • Over 34,000 employees with 3,000+ jobs created in the last 12 months 20
10 Year Sales Performance £ millions 1500 1409 1400 1281 1300 1197 1200 1072 1100 996 955 1000 908 889 848 900 810 800 700 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Continued strong sales growth 21
Changing Sales Mix Over Last 10 Years 0.4% 0.5% 0.7% 100.0% 3.2% 4.8% 4.5% Other 90.0% 23.2% Machines 80.0% 29.4% 35.3% 70.0% Food 60.0% 50.0% Bar 40.0% 71.6% 65.6% 30.0% 60.8% 20.0% 10.0% 0.0% FY 2003 FY 2008 FY 2014 Long-term growth in food mix 22
Britain’s favourite big brand If the following brands were available in the same location, which would be your first choice to eat at? (ranked by % of adults choosing each brand) ( out of a list of 16 – the top 6 ) The Nightjar, Ferndown May Oct April Oct April 2012 2012 2013 2013 2014 Wetherspoon 11% 12% 12% 12% 13% Nandos 9% 9% 9% 8% 8% Toby Carvery 5% 5% 5% 5% 7% Pizza Express 6% 6% 7% 6% 7% Wagamama - - 6% 5% 7% Harvester 9% 8% 8% 8% 6% Source: Peach BrandTrack, May 2012, October 2012 ,April 2013, October 2013 & April 2014 23
Market Update Where we sit down and eat - BRITAIN’S MOST VISITED PUB & CASUAL DINING BRANDS Claimed usage in last 6 May 12 Oct 12 Apr 13 Oct 13 Apr 14 months Wetherspoon 44% 40% 43% 43% 42% Harvester 29% 28% 28% 29% 24% Pizza Hut 41% 30% 32% 31% 23% Pizza Express 26% 22% 21% 22% 23% Nando’s 26% 20% 23% 22% 20% Toby Carvery 16% 14% 16% 16% 20% Frankie & Benny's 25% 19% 21% 22% 18% Brewer's Fayre 15% 14% 14% 15% 13% Beefeater 16% 13% 13% 14% 12% Hungry Horse 11% 10% 11% 11% 11% 24 Source: Peach BrandTrack, May 2012, October 2012 , April 2013, October 2013 & April 2014
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